26 October 2016
Transcript - #2016151, 2016

Interview with Leon Byner, FIVEAA

SUBJECTS: Senate negotiations; Labor’s refusal to back tax relief for Australian businesses; Nick Xenophon Team; foreign investment; budget savings; Labor’s refusal to stamp out militant behaviour in the construction industry

TREASURER:

Good to be back here Leon.

LEON BYNER:

Tell the people why you’re here.

TREASURER:

I’m here today, I’m sitting down with South Australian Businesses, South Australian Businesses that we want to give support to through a tax cut as part of our enterprise tax plan. Businesses with a turnover of up to $50 million. Some of those are the best household names in business in South Australia and indeed around the country, like Haigh’s in particular, who is a business between $10 million and $50 million in turnover. They employ some 424 South Australians. So we want to be able to give those businesses the support they need to be profitable here and to continue to do business here and employ people here.

BYNER

You need Senate votes to get this through and the ones that you’re counting on, or hoping for, are from the Xenophon team.

TREASURER:

Well that’s right. I’ve had some constructive discussions with Senator Xenophon about this. It’s a shame that the reason we have to talk to Senator Xenophon about this is because the Labor Party having spruiked the idea that it’s good for businesses to pay less tax to grow the economy and support investment and jobs now when they have the opportunity to vote for that very policy, they say no. So we’re forced to negotiate with crossbench on this.

BYNER

Let’s be clear that the Labor Party would agree for these tax cuts up to $10 million.

TREASURER:

No. They are refusing to support tax cuts for businesses over $2 million. Senator Xenophon has said so far that he’ll support it at least up to $10 million. But, in this term of parliament we had a plan that went out over 10 years. What we’re saying to Senator Xenophon is we took this plan to the people at the last election. We were returned, and we would like to implement at the very least, the tax cuts for those businesses who would have benefited in this term. Now, we’d obviously like it to go well beyond that because we know that’s good for investment. It’s good for growth. It’s good for increasing real wages, which is a big issue out there, and it’s good for jobs.

BYNER

Can I explain to you, and you probably know this. The people who you’re going to talk to today, their biggest kahuna is the cost of energy. Now, for example, Rodger Drake, he’s just signed a contract pretty much under duress, because he could only get three offers. He’s contract currently runs out in December. He’s got to pay an extra $2 million a year, just to have the same energy he had last year, except, he’s up for $2 million. Now, he wouldn’t be the only one. Every other business your talking to Haigh’s or whoever, would have the same problem.

TREASURER:

And I’m sure they’ll raise those issues, and I think they’re right to raise those issues and we’re very sympathetic on all of those issues. But providing support in terms of lower taxes for businesses here in South Australia doesn’t have to be done at the expense of not also addressing that issue. I think they’re both big issues, and we need to address both. You’ve already heard from Josh Frydenberg who’s been trying to get the states and territories together to ensure that we have more realistic targets when it comes to the RET, and that is a big issue here in South Australia and we’ll continue to pursue that.

BYNER

The problem, there’s a bidding process going on where generators go into a pool, and bid to supply power or not. The way the rules work is very much against the consumer, because it means the highest price is going to win. You put that into the market, and we’re all paying too much.

TREASURER:

Well the South Australian Government has gone down I think a very disappointing path on renewables. What they’ve done is set unrealistic targets, they’ve relied too much on that section of the market to meet base power needs, and we know where that ends. We don’t think that’s the path that we should be going down, either here in South Australia or anywhere else. That’s what Josh Frydenberg is working to resolve and we’ll keep doing that Leon, but why I’m here today, is to address the issue which I can particularly address, and that is to ensure that these businesses, I mean there are manufacturing businesses. These are biotech businesses. These are long established businesses, and they want to keep doing business here in South Australia and I want to help them do that by giving them lower taxes.

BYNER

Well alright, on the business of exports, even Andrew Forrest is for this, and that is that you got to start exporting under one Australian brand, ostensibly competing with New Zealand, which as you know, we have a treaty with and they already get favoured treatment from us. In a sense, commercially here, they’re our enemy. What do you think this could be worth, realistically to our country with this deal of export under one global brand?

TREASURER:

Integration of our marketing overseas under more recognisable single brands I think has always been a good process. We do sell under a lot of them, and Julie Bishop and Steven Ciobo, and prior to that Andrew Robb, have been working to consolidate all of that. That said Leon, our export performance in the most recent figures was the best since the Sydney Olympics. So, exports are doing very well for Australia, and particularly in the area of service exports, particularly in the areas of international education, where South Australia, I think has a very strong advantage and it’s going to be a key employer for South Australians going forward. The services economy through South Australia is one of the real optimistic parts of this economy. That’s why I think it’s important that wherever we can work it all together, and sell it under one banner, then great.

BYNER

Alright. You’ve got $6.6 billion in an omnibus saving…

TREASURER:

$6.3 billion.

BYNER

But realistically though, you talk to any of the economic experts and they’ll say that we gotta save a lot more than that.

TREASURER:

You’re right. We’ve got more than that. We’ve got $40 billion of Budget improvement measures before the parliament already. We’ve been able to pass $11 billion of those in just the first few weeks of sittings. We have around $6 billion in social services savings, that is absolutely critical that we get the support of the Xenophon team on, because the Xenophon team, now let’s be really clear. When the Labor party is going to vote against improving the Budget by getting expenditure under control, it’s going to fall to the Xenophon Team because the Hanson Party supports it as has Bob Day, as has Senator Leyonhjelm. If the Xenophon Team don’t support savings measures in the Senate, then the deficit will get higher, the debt will get higher, and our rating gets under extreme pressure, so they sit in the box seat here and they can’t squib it.

BYNER

But you’re going to the Xenephon Team and saying, we want to give these tax cuts. How much will they cost the Budget? Just, what is your number of what these tax cuts you want to get through, you’re negotiating with the Xenophon Team now. What’s that worth to the Budget?

TREASURER:

Every time we cut taxes in this country, the tax revenue from companies goes up Leon. So when you invest in cutting taxes, you actually invest in businesses investing back in their businesses.

BYNER

But what’s this costing the Budget?

TREASURER:

The second round effects in terms of these things are never taken into account Leon. I mean the cost to the Budget taking everything into account, over this current Budget cycle, is $2.4 billion. It is less than that. It’s around $1.4 billion, when you look more specifically at the cut from 28.5 per cent down to 27.5 per cent. But this is an investment back into growing businesses because Leon, yes we have to balance the Budget. But yes also, we have to grow the economy, grow jobs, increase people’s real wages, and you can’t do that if you’re going to tax businesses and prevent them from reinvesting in their own business, in their own employees, in their own equipment.

BYNER

You mentioned Bob Day. Is the Liberal Party doing anything to keep him in the Senate, or is that totally nonsense, because the Labor party have suggested…

TREASURER:

The Labor party is always lying Leon. I mean they lie about everything, they come up with some conspiracy theory…

BYNER

Bu they’ll say the same about you.

TREASURER:

Leon, they are lying about this like they lie about so many other things. Bill Shorten lied to the Australian people at the last election and he continues to lie every single day.

BYNER

Where do you stand with Bob Day?

TREASURER:

Bob Day’s position in the parliament is a matter for Bob Day. He makes a decision about when he resigns and when he doesn’t resign. The law is very clear. If a person is bankrupt then they can’t sit in the parliament. That’s the rule. Remember this is the Labor Party which relied on the former member for Dobell. This is the fellow who was – we know that story – they relied on that vote in the parliament before last, when they were in Government. Craig Thomson’s vote kept the Labor party governing under Julia Gillard and Kevin Rudd.

BYNER

We know this.

TREASURER:

For them to give lectures on this - if they’re comparing Bob Day to Mr Thomson, well, I think that’s a pretty harsh comparison.

BYNER

I just need a clarification here, you say that your side have nothing to do with Mr Day’s staying or not staying, or getting his businesses in order or not.

TREASURER:

That’s completely a matter for him.

BYNER

I want to talk about the FIRB. Now I know you can’t comment on matters before you, but we’ve already spoken to Stirling Buntine, who is making a counter offer which he says is worth more than the current one for Hancock prospecting. Just explain to the people of Australia, because we were putting a lot of posts up on ‘don’t sell Australia short’ and there’s been a lot of discussion about why the FIRB is involved. Can you explain that?

TREASURER:

Well first of all, you will recall that I rejected the two foreign investment proposals for Kidman earlier this year, on two occasions. The reason we now have the Australian bids coming forward is a direct result of those decisions. Now the Labor party were going to approve the foreign investment of the Kidman sale. They made that very clear before the last election. The Federal Government, Commonwealth Government, only gets involved on a transaction if there’s a foreign interest involved, a private foreign interest and for critical infrastructure, if it’s a state owned enterprise, or something of that nature. So it is up to the Kidman board to decide who they sell it to. They are the people selling it, not the Government. If there is a foreign component to the purchaser, then that will obviously have to go through the FIRB processes. They make a recommendation to me, and then I ultimately make a decision.

BYNER

Ultimately the criteria are?

TREASURER:

That’s it’s not against the national interest. That’s what the law says. And that’s the basis on which I made the previous two rejections on the Kidman sale to foreign interest previously. I would consider those matters if they indeed came before me. But if they choose to go with a bid, which is completely Australian based, well, FIRB and I won’t be asked to make any decisions.

BYNER

Just for the record, are you considering their offer at the moment? Or not?

TREASURER:

Well it’s not in front of me presently.

BYNER

Is FIRB considering it?

TREASURER:

Again, the process hasn’t been completed with these bidders so we’ll wait to see how that all finalises and then who, if any, decision needs to be made by the Commonwealth Government. At the end of the day, that’s for Kidman, the board of Kidman to decide who they want to sell it to.

BYNER

The polling for the Coalition at the moment, soon after an election is not great. I know you’ve argued, and you’re arguing that some of the things you want to do, the matters of which we’ve just discussed is virtually a mandate. Why do you think people are so unhappy with the Government so soon out after an election, when Malcolm Turnbull…

TREASURER:

Well we’re not very distracted by this one, because we’ve got lots to do. We’re early on in a term where there’s lots to do. There’s Budget improvements which have to be made. There’s savings which have to be made in the Budget. I’ll let others get all excited about polls a couple of months after the election. What matters is a few months ago, we went to an election, we got a mandate and now we’re getting on with governing and doing the job. I just think what’s happened over those few months Leon, the ABCC Bills were passed through the house again, in the last week. The Appropriation Bills went through, on top of that we had Registered Organisations, the VET fee help debacle that’s started under Labor. That legislation went through. $6.3 billion in savings. Income tax cuts passed through both houses of parliament. I mean, it’s been a busy few months.

BYNER

So the big priority now is this tax cut for businesses with turnovers up to $50 billion.

TREASURER:

That’s right, that together with the ABCC and the Registered Organisations Bills. They’re the bills that will be coming up as the Senate meets again, before we break for the Christmas period. These are important bills, and they’re important bills to improve productivity in our construction and building industry. Here in South Australia the CFMEU were going to close down a site because they wouldn’t fly the CFMEU flag from a crane. I mean, seriously. That’s what’s going on in our building and construction industry.

BYNER

Are you meeting at all with the Government today, of South Australia?

TREASURER:

I don’t have any meetings today, but I’m meeting up with Tom later in the year as part of our normal CFFR process which is the meeting of the state treasurers. There’s a few issues for us to discuss there. But we stay in regular contact with both Jay and Tom.

BYNER

Can you give SA though, some kind of indication as to whether you can do something substantial to reduce the cost of electricity. It is a huge issue here.

TREASURER:

Again, that’s something that’s being specifically pursued by Josh Frydenberg with the measures that he’s already outlined. We continue to work, whether it’s the state government or Rowan Ramsey, the member who’s been doing a great job out there in terms of Whyalla, and dealing with the issues of Arrium. We engage with the Xenophon Team on those issues as well. They’re complicated, but what I want to do today, is I want to make sure that the about 680 businesses which are based in South Australia, that have a turnover between $10 million and $50 million, I would like to give them a tax cut so they can invest in their businesses and their employees which can mean higher real wages, it can mean more jobs, it can mean better equipment, it can mean more contracts. I want to give them that break. The only people standing in the way of that are the Labor Party and given they are blocking it, well Nick Xenophon has an opportunity to support those South Australian businesses here. He also has the ability to support the Government to get the Budget back into balance. When we came to Government we were borrowing $3 billion a week Leon. $3 billion a week.

BYNER

How much are we borrowing now?

TREASURER:

It’s $1.4 billion now. So we have more than halved that in the space of three year. Now I want to cut that down even further. I’d like to get it as close to zero as I possibly can get it. That’s where we’re heading.

BYNER

How much interest are we paying on this?

TREASURER:

We’re paying $16 billion on our interest gross, every year. That’s almost as much as we now spend on schools.

BYNER

Scott, thanks for joining us.

TREASURER:

Thanks Leon.